RBI keeps repo rate unchanged at 6.25 per cent in bi-monthly policy

RBI keeps repo rate unchanged at 6.25 per cent in bi-monthly policy
RBI governors in the past have refused to toe FM line too

New Delhi: The Reserve Bank of India (RBI) kept the repo-rate unchanged at 6.25 per cent in its last bi-monthly monetary policy of the current fiscal. The announcement was made by the RBI governor Urjit Patel on Wednesday at the Reserve Bank of India (RBI) headquarters in Mumbai .

RBI also kept Reverse Repo Rate unchanged at 5.75 percent. The apex bank stated that expected growth is 6.9 percent for 2016-17 fiscal year ending in the month of March.

The next policy review will be made in May next.

This monetary policy also held an interesting fact that it was the first one after the announcement of Union Budget 2017, the second one post-demonetisation of high denomination notes and the last one of the current financial year.

Other decisions of RBI:

  • Limit on cash withdrawal from savings backs accounts to be relaxed in 2 stages.

  1. From February 20 the limit will be increased from Rs 24 thousand to Rs 50 thousand.
  2. From March 13 there will be no limit on cash withdrawal from savings bank accounts.

The decision has stroked out all speculations of the apex bank cutting repo-rates by 25 bps (basis points).

What else Urijit Patel said:

  • Speaking about the fake higher denomination currency notes being seized by the police post-demonetisation, the RBI chief stated, "Both new notes of Rs.2000 and Rs.500 are difficult to copy, the ones being found are photo copies."
  • Total 9.92 lakh crore rupees of total currency including new notes of 500 and 2000 is in circulation as of 27th. January.
  • India's banking system is robust,saying there are flaws because of few incidents is wrong.

What were the expectations:

  • Some Industry experts, economists and bankers were expecting the rate cuts in the policy that has been prepared by the Monetary Policy Committee (MPC) led by Urjit Patel.
  • According to the experts, consumption and investment took a hit, after the demonetisation, that had brought the retail inflation to a three-year low of 34 per cent which has made space for the RBI to effect a rate cut to an extent of 25 bps.
  • While Noumra was assured of rate cuts and said that it may be the last one for the rest of the year, rates strategist of Nomura India Vivek Rajpal had stated that if RBI cuts rate by 25 bps, bond yields will rally only by 5-10 basis points.